LONDON--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Rating to “b+” from “bb” of Bankers Assurance S.A.L. (Bankers) (Lebanon). The Credit Ratings (ratings) are under review with negative implications. Concurrently, the ratings have been withdrawn at the company’s request to no longer participate in AM Best’s interactive rating process.
The ratings reflect Bankers’ balance sheet strength, which AM Best categorises as adequate, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
The rating downgrades reflect further weakening of economic, political and financial conditions in Lebanon and the consequent deterioration in Bankers’ balance sheet strength. In addition, AM Best has revised its assessment of Bankers’ enterprise risk management to marginal from appropriate, due to the impact of conditions in Lebanon on the company’s risk profile and the difficulties it faces in managing an increasingly challenging operating environment.
In AM Best’s view, economic, political and financial system risk in Lebanon, which was already elevated, has risen following the devastating explosion in the port of Beirut on Aug. 4, 2020 and the subsequent protests and resignation of the government. Through 2020, political uncertainty in Lebanon has increased and economic and financial conditions have deteriorated, compounded by the country’s default on its USD 1.2 billion Eurobond in March 2020 and by the global spread of the COVID-19 pandemic. The significant weakening of the local banking sector, which is in need of substantial recapitalisation, has amplified cash flow constraints in the economy.
Bankers has significant exposure to Lebanon, where it sources all of its business and holds a large majority of its assets. In particular, the company’s investment portfolio has material exposure to the domestic banking sector through holdings of corporate bonds and cash and bank deposits. The risk associated with these assets has increased following the worsening of Lebanon’s economic situation.
The ratings are under review with negative implications, due to the potential for ongoing country risk pressures to lead to further deterioration in the company’s balance sheet strength over the near term.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.